ALSO BY LAWRENCE W. TULLER Exporting, Importing, and Beyond Mastering Markets in South America Strategic Marketing in the Caribbean Strategic Marketing in Central America Strategic Marketing in South America Doing Business in Latin America and the Caribbean The World Markets Desk Book The McGraw-Hill Handbook of Global Trade and Investment Financing Going Global: New Opportunities for Global Companies to Compete in World Markets • Negotiating contracts and agreements • Understanding culture and customs • Marketing products and services An American’s Guide to Doing Business in Latin America Lawrence W. Tuller CONTENTS CHAPTER 1: THE NEW LATIN AMERICA The Lost Decade Relationship Between Washington and Latin America Promises of the Summit of the Americas Trade Pact Fever Opportunities Abound Deficiencies That Still Remain Intra-regional Cultural and Business Differences CHAPTER 2: LATIN A MERICA’S UNIVERSAL ISSUES Competitiveness in Latin America A Wasting Environment Violent Crime Insidious Corruption Selling With E-Commerce CHAPTER 3: LATIN AMERICA’S SOCIAL ISSUES Education Shortfalls The Gender Gap The Evils of Joblessness Extreme Poverty and the Spreading Wealth Gap Broken Health-Care Systems Trafficking in Persons Summary CHAPTER 4: MAJOR MARKET OPPORTUNITIES Varied Market Strategies Argentina Brazil Chile Colombia Costa Rica Mexico Conclusion CHAPTER 5: LATIN TRAITS THAT BAFFLE AMERICANS Family Values Easy-Going Lifestyle A Live-And-Let-Live Attitude Respect for Age Community Involvement Class Separation Gender Class Difference Power of the Church Racial Bias National Pride CHAPTER 6: MARKET RESEARCH: PERFORMING A COUNTRY SURVEY Business Structure Audit, Tax, Legal, and Licensing Requirements Communications Bottlenecks Insurance Political and Economic Environment Market-Specific Business Conditions Government Subsidies Transport, Licenses, Security, and Labor Infrastructures and Free-Trade Zones Personnel Matters Exchange Controls Summary CHAPTER 7: COUNTRY RISK ASSESSMENT Country Risks Defining Market-Entry Options and Risks External to a Company’s Authority Quantifying the Impact of External Risks A Case Study: U.S. Fabrisource and Avionics Corporation CHAPTER 8: MARKETING CHANNELS Commissioned Agents of Latin American Governments and Companies Export Management Companies Export Trading Companies Captive Export Trading Companies Foreign Trading Companies Direct Selling Distributors CHAPTER 9: ADVERTISING Cultural Sensitivity Alternative Media Internet Advertising Trade Shows CHAPTER 10: TRADE FINANCE Short-Term Strategies Variations on Documentary Letters of Credit Documentary Banker’s Acceptances Getting Paid Intermediate-Term Strategies Small Business Administration (SBA) Long-Term Strategies Countertrade Strategies CHAPTER 11: INFRASTRUCTURE DEVELOPMENT AND PROJECT FINANCE Private Participation in Infrastructure Development Foreign Direct Investment from U.S. Companies Future Opportunities for U.S. Companies Financing Infrastructure Projects Global Project Finance Banks Development Banks Overseas Private Investment Corporation U.S. Trade and Development Agency United Nations Programs Appendix A: Export Assistance Centers Appendix B: Small Business Administration Regional Offices Appendix C: Latin American Trade Associations in the United States Appendix D: American Chamber of Commerce Offices in Latin America Appendix E: Bi-National Chambers of Commerce in Florida Appendix F: Internet Addresses Map of Latin America Chapter 1 The New Latin America Get out of the way, India. Move over, China. Stand back, Southeast Asia. Here comes the new kid on the block, a reborn Latin America. Bursting with enthusiasm. Ready to erupt with a dynamism unseen in the Western Hemisphere since the Industrial Revolution. Latin America, exuding an economic exuberance that is sure to be the envy of the developing world. And U.S. exporters have seen this coming. Last year alone they shipped four-and-a-half times as much product to this region as they did to China, twenty-four times the amount they shipped to India, and twice as much as they shipped to the United Kingdom, Germany, and France combined. But doing business in Latin America is not easy. A constantly changing landscape makes long-term strategies especially difficult. If there is one truism about this region, it is that if you don’t like the way the politics, economics, and social conditions are going now, wait ‘til tomorrow and they will change. Latin America’s never-stopping politico-economic pendulum swings wildly to and fro. From dictators to freely elected presidents to elected autocrats. From liberal socialist governments to reactionary right-wing rule to populism. From hyperinflation to modest economic growth to rapidly rising prices. From shattered banking systems to stable financial markets to bank failures. From protectionist trade to free trade to the nationalization of entire industries. From isolation to open borders hungry for foreign investment to forced joint ownership of projects with government. Such a wildly swinging pendulum muddies the waters for trade and investment. Misunderstanding the North and misunderstood by the North, Latin governments and their citizens continue to ride the fringes of economic progress, unable to penetrate the psyche of either Republican or Democratic administrations in Washington. Part of the problem is the enormous mixture of cultures that comprises Latin America and confuses Americans. Mexico, the Caribbean nations, Central America, and South America—in fact, everything south of the U.S. border— comprise what we commonly call Latin America. Imposed by the Spanish conquerors of the sixteenth and seventeenth centuries, the Spanish language dominates the region, but other languages are also spoken. Portuguese is the official language in Brazil; it’s English in Guyana, Dutch in Suriname, and French in French Guiana. In the Caribbean, English, Dutch, French, and Creole are spoken along with Spanish. In Central America, English is the language of Belize. Spanish is official in all other countries. One- third of Guatemala’s population is indigenous and speaks a mixture of Mayan dialects. Culturally, the region is equally mixed. In countries where Spanish or Portuguese is the official language, the Hispanic culture and Catholic religion inherited from Spain and Portugal are predominant. In Guyana, however, more than 50 percent of the population is descended from East Indians and practices the Indian culture and Hindu religion. In Haiti, a combination of French and African cultures has nurtured the Voodoo religion. The English-speaking Caribbean mostly consists of African descendants influenced by a European heritage, creating a unique West Indian culture that has welcomed Pentecostal preaching. Fidel Castro’s atheism and its penetration of the Cuban culture is unique in the region. In Central America, Peru, Bolivia, and Ecuador, as well as in certain parts of Brazil, mestizo is the predominant race. A mestizo is a person of mixed ancestry, especially of mixed Spanish or Portuguese and indigenous Amerindian. Argentina is strongly influenced by descendants of settlers from Northern and Southern Europe, especially Italy and Spain. In the Caribbean, the United States owns a territory (the English-speaking Virgin Islands) and a commonwealth (Spanish-speaking Puerto Rico). Size also matters, especially in the business world. Brazil dominates the region, with 186 million people and a geographic size equivalent to the continental United States. Its industrial base is very similar to that of the United States. Manufacturing, retail, and service industries are all healthy and growing. At the other end of the spectrum, Haiti and Nicaragua are the two poorest countries in the region with gross domestic product (GDP) per head of $1,600 and $2,400, respectively. These two countries, along with Bolivia and Suriname, stand in stark contrast to the sophisticated urban centers of São Paulo, Rio de Janeiro, Buenos Aires, Santiago, Bogotá, and Mexico City. Political upheaval and violence have characterized Latin America for centuries. Prior to 1989, when a democratic wave washed over virtually all Latin American countries, Peru had experienced only four years of elected governments, Ecuador eight years, Brazil one year, and Uruguay barely four months. Bolivia had gone through 180 presidents in 160 years. Peronist Argentina had been little more than a police state for seventy years. Paraguay’s iron-fisted president, Alfredo Stroessner, played host to thousands of Nazi war